The Vice-Chair (Mr Doug Galt): I will call the committee to order. It's 10 o'clock. I'm filling in for the Chair, Marcel Beaubien. We look forward to the presentation from the various representatives of the Ministry of Finance.

MINISTRY OF FINANCE

The Vice-Chair: We'll call the delegation, Dr Bryne Purchase. Possibly, Bryne, you could introduce the various staff who are here. They're not all here right now, but they will be.

Dr Bryne Purchase: Yes, they will be here shortly.

The Vice-Chair: As you name them, they can put their hand up so the committee members recognize them.

The Vice-Chair: My understanding is, from 10 to 12, to have a presentation from the ministry staff and then questions and answers from the three parties until 12 o'clock.

Mr Phillips: Will there be any opening statement by the minister's representative?

The Vice-Chair: My understanding is the opening statement is from the deputy minister, Dr Bryne Purchase, and his staff.

Mr Phillips: As you know, I requested that the minister be here, and in the absence of the minister, I gather the parliamentary assistant is responsible for carriage of the bill. I expected he might want to make an opening statement and then perhaps we could make an opening statement so that the ministry staff's comments might be geared to helping us answer the questions we've got as well.

The Vice-Chair: I don't think there's any question, Mr Phillips, that the parliamentary assistant will help with answering the questions. As you recall, the subcommittee report came in asking for the minister, but that was overturned by the full committee.

Mr Phillips: I received a letter yesterday from Mr Young himself saying that he was going to be essentially representing the minister, and I wonder if he has an opening statement for us.

The Vice-Chair: We can ask. Mr Young?

Mr David Young (Willowdale): I certainly appreciate Mr Phillips giving me the opportunity to make an opening statement. My concern, though, is that the opposition parties-or I guess party; there's only one here right now-have as much time as possible to question the ministry staff who are here. We have a morning session here that has been devoted to essentially a technical briefing. Rather than engaging in lengthy statements from both sides, or all sides, which would undoubtedly involve a good deal of repetition of things we have said in the past, it's my respectful submission that we simply get right into the questioning and in due course, over the remainder of the days set for these hearings, there'll be ample time to set out whatever would be said in an opening statement.

Mr Phillips: Do you mind if I take five minutes, just to give the staff an opportunity to perhaps in their comments respond to our concerns?

The Vice-Chair: If there is agreement in the committee, because that wasn't what was planned.

Mr Young: I have no objection to that.

The Vice-Chair: Any objections? Is everybody agreeable? OK. You have five minutes, then, Mr Phillips.

Mr Phillips: Starting now.

The Vice-Chair: Starting now. I'm going to be Chair today, so I'm going to keep you right on the mark.

Mr Phillips: OK. The major concern that we in the Liberal caucus have is Ontario's ability to fund our fundamental services in the future: health care, education, and we've been through in the last few days other areas in the environment. I think before anyone can agree to this bill, we need to have from the minister and, lacking the minister, from the minister's staff, some indication that we can do these things and still fund our essential services.

I gather from this bill that the plan is to reduce corporate taxes from 15.5% to 8% or from 13.5% to 8%. I gather the government is urging the federal government to essentially match it, to reduce corporate tax levels to dramatically below neighbouring US states. If we proceed down that road, I want to know where we are going to find the revenue.

I would just add that when the government sends its documents out to say, "Come and locate in Ontario," it says in this document that health care costs in Ontario are $2,500 lower per employee than in neighbouring jurisdictions. It says, "The amount of money you will have to spend as an employer in Ontario is $2,500 less." That, I might add, if you just take the auto sector, 143,000 employees in the auto sector in Ontario, is a $350-million cost advantage, the way we fund health care, the way that health care is provided in Ontario versus Michigan or New York or Illinois. General Motors alone I think gets an annual advantage on that aspect of about $65 million. If, as the government says, we need now to have corporate tax rates substantially lower than neighbouring jurisdictions, and we want to retain our health care system, and we want that $2,500 advantage, we have to find the money elsewhere.

I also gather from the documents that Ontario is proceeding with a 15% cut in personal income tax. The one piece of advice that the government gave to the federal government before its budget was, "Cut your personal income tax levels by 20%." We have in this budget-although not in this bill, but in the budget it's part of this-a plan to reduce capital gains from 75% to 50%, which has an impact on our income tax revenue. The second, and by the way, 75% of the federal government's revenue comes from corporate taxes and income taxes, and 55% of our tax revenue comes from personal income tax and corporate taxes. So on the one hand, we want corporate taxes lower than neighbouring jurisdictions, and I gather we're aiming for personal income tax levels equal to neighbouring jurisdictions.

For us in the Liberal caucus, it is quite fundamental to have from the minister, and lacking the minister, from the minister's staff or the parliamentary assistant, an assurance that we can proceed with these tax measures and still fund our health care and our education system. It was ironic, I was looking in this document Doing Business in Ontario, and one thing it says is, "Ontario means beautiful, sparkling, shining water." We need money to ensure we have that.

As we proceed with this, and I view this as a package, I realize we're dealing with mainly corporate and income tax, land transfer, some sales tax issues, but it's part of the broader picture. Can we get an estimate, a look at the future expenditures and revenues? In the federal economic background, they provide a five-year revenue and expenditure forecast. They're able to do it. The government itself, Mr Eves in a letter to the federal government, said, "We've looked at your federal numbers and we see you're going to have a surplus," so I presume that provincial government has looked at forecasts for the federal revenue and reached some conclusions. I've had difficulty in the past couple years getting any estimates out of the minister or the staff, although we've been told that detailed revenue forecasts are prepared by tax line. Somewhere in the ministry the numbers exist.

That is my opening comment. We have before us a package of about $9 billion of tax cuts, $4 billion in the corporate sector, $1.2 billion in capital gains, about $3 billion in personal income tax, and we're being asked to approve that without a look at whether, in fact, we can continue to provide what I regard and what our caucus regards and, I think what most Ontarians regard, as the essential services.

The Vice-Chair: I think we're going to have to move on. You asked for five; we're well over six now.

Mr Phillips: Thank you. I look forward to the response.

The Vice-Chair: We'll move to the delegation. Dr Purchase, would you introduce your staff, at least those who are present, and we'll continue with your presentation.

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Dr Purchase: My name is Bryne Purchase. I'm Deputy Minister of Finance. With me are Tom Sweeting, assistant deputy minister, office of the budget and taxation; Graham Stoodley, director, office of legal services; and Philip Howell, assistant deputy minister and chief economist, office of economic policy. We would like to have a brief technical presentation by Mr Sweeting first to the committee.

Mr Tom Sweeting: Thank you, Bryne. Good morning. I would like to take a few minutes just to run through for the committee the main items that are in Bill 72, the Taxpayer Dividend Act, 2000. There is a presentation, I believe, that every member of the committee should have.

Part I of the act deals with cutting corporate income tax rates. The 2000 Ontario budget announced a comprehensive strategy to cut both the corporate income tax rate and the manufacturing and processing rate to 8% by 2005. This would be the lowest general corporate income tax rate in Canada, compared to current rates in other provinces. The result would be that Ontario and federal corporate income taxes would be more than 10 points below the average current rate in US Great Lakes states.

This bill implements the first two steps of this plan. The general corporate income tax rate is reduced from 15.5% to 14.5% effective May 2, and to 14% effective January 1, 2001. The M and P rate is reduced from 13.5% to 12.5% effective May 2, and to 12% effective January 1, 2001.

There are also changes in this bill related to the small business tax rate. These amendments implement the budget proposal to accelerate and enhance the 1998 budget scheduled cut to the small business rate. At that time there was going to be a cut over several years to a small business rate of 4.75%. With the budget, the rate cut is proposed to go from 8% to 7%, effective on May 2, 2000, and to 4% by January 1, 2005, a year earlier than the original plan.

The reduced rate of 10% available to credit unions on income in excess of the small business deduction is also harmonized with the proposed small business tax rate.

As well, the small business income tax rate will be available to more small businesses. The bill proposes that the income limit for access to the full small business deduction will be from $200,000 to $400,000 and it will be phased in until January 1, 2005. Also, the limit at which some relief is still available would be raised from $500,000 to $1 million, phased in over the same period of time. This will be of benefit to 7,500 growing Ontario small businesses.

The Income Tax Act implements a made-for-Ontario tax system. The budget proposed in the act is proposing that, beginning in 2000, Ontario's tax brackets and rates will be set independently of the federal tax brackets and rates and Ontario tax credits and adjustments would be set to maintain the benefits provided under the current system.

Also proposed is a reduction in the Ontario personal income tax rates applied to the first- and middle-income brackets, effective July 1, 2000. Those proposed rates are documented in this presentation for taxable incomes of less than $30,004. The rate for 2000 is proposed to be 6.37%, down from the 6.545% that was in place prior to 2000, and the rate next year will be 6.2%. For taxable incomes between $30,004 and $60,009, the rate will be 9.62% for 2000, which is down from 10.01% after the 1999 budget, and next year, 2001, the rate is proposed to be 9.24%; and above $60,009 the rate is proposed to be 11.16% in both 2000 and 2001.

There's also an amendment made related to environmental trusts to parallel the change in tax rates that are made for corporate income tax purposes, as these trusts are taxed as corporations since they are established as corporations, not as individuals.

The act also proposes the payment of a taxpayer dividend, which would be a rebate of up to $200 of Ontario personal income tax paid in 1999. Taxpayers who paid some Ontario income tax but less than $25 would receive a rebate of $25; those who paid between $25 and $200 would receive the tax that they paid; those above $200 would receive $200.

There are changes to the Ontario child care supplement for working families to provide a new single parent's benefit to this program that was introduced in the 1998 budget as a reinvestment under the national child benefit initiative. This change would increase the maximum annual benefit by $210 for single parents, from $1,100 to $1,310 per child under age seven, effective July 2000.

On the land transfer tax front, the bill proposes to make permanent the land transfer tax refund program for first-time buyers of newly built homes. Qualifying purchasers will now apply for a refund no later than 18 months after the registration of the home purchase where a refund is not claimed at the time of registration. The effective date for this is April 1, 2000.

Mining tax: Bill 72 implements the budget proposal to reduce the mining tax rate from 20% to 10% by January 1, 2004. There is a schedule, with rate changes occurring on May 2-the rate will be 18%; January 1, 2001-16%; January 1, 2002-14%; January 1, 2003-12%; and January 1, 2004-10%.

With respect to retail sales tax, the bill implements a budget proposal to phase out the retail sales tax on repairs and replacements made under warranty. The proposed phase-out schedule is 6% of the cost of the property acquired after May 2, 2000, and before April 1, 2001; 4% of the cost of the property after March 31, 2001, and before April 1, 2002; 2% of the cost of the property after March 31, 2002, and before April 1, 2003; 1% of the cost of the property after March 31, 2003, and before April 1, 2004; and the tax rate would be phased out by April 1, 2004.

With respect to motor vehicle insurance premiums, it implements a budget proposal to phase out the RST on motor vehicle insurance premiums. It's phased from 5% to 0.0% over four years, starting May 3, 2000, and ending April 1, 2004. This provision applies to insurance contracts on vehicles licensed under the Highway Traffic Act and insured under the Compulsory Automobile Insurance Act.

When the budget was tabled, provisions were based on insurance coverage after budget day, regardless of when premiums were due. For example, in the first stage of the reduction, the rate would be 4% of the portion of the premium payable for insurance coverage after May 2, 2000, and before April 1, 2001, under a contract of automobile insurance.

In response to administrative complications raised by the industry, clarification was provided through an information notice on May 5, 2000, that amendments would be introduced to implement the rate reductions on a "premiums due" basis. The new lower rates would apply to premiums due after May 2 as follows: 4% for premiums due after May 2, 2000, and before April 1, 2001; 3% for premiums due after March 31, 2001, and before April 1, 2002; 2% for premiums due after March 31, 2002, and before April 1, 2003; and 1% for premiums due after March 31, 2003, and before April 1, 2004. The tax is eliminated for premiums due on or after April 1, 2004.

As well, the act implements the budget commitment to exempt from RST premiums assessments or contributions made by credits unions and caisses populaires for deposit insurance. That is effective May 3, 2000.

The bill implements the budget proposal to convert the rebate program for farm building materials to a point-of-sale exemption. The implementation date will be set after consultation with the Ministry of Agriculture, Food and Rural Affairs. As well, there is a consolidation for legislative clarity: RST exemptions for farm machinery, equipment and supplies are consolidated.

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The bill implements the budget proposal to ensure that all gifts to schools, colleges and universities are exempt from retail sales tax.

Finally, the bill implements the budget commitment to exempt from retail sales tax seedlings purchased by forest resource licence holders, issued by the Ministry of Natural Resources, to support reforestation of crown lands. Thank you.

Dr Purchase: That concludes our little presentation, Mr Chairman, so we would be pleased to take questions from the members as they think appropriate.

The Vice-Chair: OK. I'm just looking at our time here. We have a little over 30 minutes per caucus. I notice that the NDP, or third party-maybe we'll just go one third, one third, and one third. Then we'll split that up if one of the thirds is not used. Do you want the whole 30 minutes at once, or would you like to do a little rotation, five minutes at a time?

Mr Phillips: Fifteen.

The Vice-Chair: So 15 minutes and then come around again? OK. We'll start with the official opposition, so your 15 minutes is starting.

Mr Phillips: Great. We're being asked to approve what I regard as the most comprehensive kind of tax plan in the province's history, perhaps. I gather the policy decision now is that we must move fairly aggressively on the corporate tax front. Is that the policy decision here?

Dr Purchase: I think the policy decision is to move both our general corporate rate and our manufacturing processing rate eventually to 8%, by 2004. I would argue that that is effectively the policy decision.

Mr Phillips: Why 8%? Why was that chosen?

Dr Purchase: The target of 8% will bring us to the lowest general rate in Canada, based on current rates across the country. It will also bring us to a more competitive level internationally, based on their current rates and based on the federal reductions.

Mr Phillips: You said in your opening remarks that it would take us 10 percentage points below the neighbouring states. Is the 10 percentage points an important-

Dr Purchase: That's a fact. That's not a target.

Mr Phillips: What is the policy decision here?

Dr Purchase: I could repeat that the policy decision is the commitment made, it seems to me, by the government in this budget that they have set a target of 8% by the year 2004.

Mr Phillips: Presumably there's a reason for that. Do we want to be lower than the neighbouring US states?

Dr Purchase: There are several reasons why one would want to reduce corporate rates. First of all, it's clear that we are not, by international standards-I guess, Mr Phillips, you've probably had an opportunity to read budget paper E.

Mr Phillips: I'm looking at it right now.

Dr Purchase: I regard budget paper E as really the essential document here in talking about tax rates and the justification for reducing those rates. Budget paper E demonstrates that Canada's tax rates, Ontario's in particular, are above those internationally. So we're not, if you like, tax-competitive internationally. The target would move us to a more competitive range. That's assuming that everyone stands still, and we know for a fact that that's not likely to be the case.

Mr Phillips: I gather you're urging the federal government to match it so that we would be combined-Ontario believes that it would be appropriate for the federal government to match Ontario's move and put us at a combined rate of 23%. Is that correct?

Dr Purchase: That's right. That's correct. We do think that.

Mr Phillips: And that's the policy position of the minister, I gather.

Dr Purchase: Yes, this document represents the policy position of the ministry.

Mr Phillips: If our corporate rates are lower than in our neighbouring jurisdictions, where do we make up for that, for the income to fund our health care system, which provides, according to other government documents, a cost advantage of about $2,500 per employee?

Dr Purchase: When we look at reducing these corporate rates, it's with an expectation that our long-term income will be much higher than it would otherwise have been. But we prudently assume that we have a revenue loss equal to our current take. That's just a prudent assumption.

Mr Phillips: So you do some future projections?

Dr Purchase: We don't do forecasting out five years at all.

Mr Phillips: The ministry does not-how far do you forecast?

Dr Purchase: The two years that you have in the document are the forecasts of the government. And in both those years there's no issue with respect to the ability to fully fund all of the programs, including health care, which is clearly a priority of the government, and balance the budget and to have a billion-dollar debt reduction. That's our plan.

Mr Phillips: We're voting on a bill today that implements tax cuts for five years, but you're telling me-

Dr Purchase: It does not implement tax cuts for five years, Mr Phillips.

Mr Young: That's not accurate.

Mr Phillips: Well, I think the small business tax cut is in the bill for five years.

Dr Purchase: Yes.

Mr Phillips: It is accurate, then.

Dr Purchase: Well, it's not accurate in its entirety.

Mr Phillips: But it is accurate.

Mr Monte Kwinter (York Centre): You just said it goes to 2005.

Mr Phillips: It is accurate.

Mr Young: Mr Chair, I'm concerned about the tone of this. There's about three instances I've experienced in the short time I've been here during Mr Phillips's questioning where he has cut off Dr Purchase. Dr Purchase is here to respond to questions. Presumably, if the question is posed, he would like to hear an answer. If he doesn't like the answer, he's certainly entitled to ask a further question or to comment-

Mr Phillips: Mr Purchase said that what I said was inaccurate, and that was not the case.

Mr Young: Well, here's another example of Mr Phillips cutting of the speaker who has the floor.

The Vice-Chair: There is a point here, and it may be just a little more respect for each other in the discussion. Proceed, Mr Phillips.

Mr Phillips: It is accurate that this bill implements tax cuts for five years. I just want to know-if the minister were here I would ask him the question. I find it very unfortunate that he's not here. I have to ask you the policy questions. I think that's unfair to you, but I have no choice. I had the same problem when you came before us pre-budget. I think it's unacceptable that we do not have some forecast of our revenue over more than-I'm not even sure that we've got two years here. In previous meetings we've had with your staff, they've said they do prepare these detailed numbers. It is inexcusable to me that we are being asked to approve financial plans, running out five years, with no numbers. If this were a business, I dare say the shareholders, to use the jargon that the Harris government uses, would be irate. I simply want to know from you-I would prefer it from the minister-I want some assurance that we can fund our health care system, our education system, our environmental concerns and still implement this tax bill.

Dr Purchase: No disrespect meant if there was any implied in my remarks; it was unintentional.

With respect to the question you raise about assurance in the future, what technical assurance can I give you? I can tell you that as I understand the government's policy-this is me interpreting what I see-they have committed, clearly and unequivocally, to a balanced budget going forward. That's forward as far as you wish to forecast. That, to me, is not a forecast. That's not a "Maybe," "Well, it could be," or, "Who knows what might happen?" That's a clear policy commitment that the budget will be balanced.

There is also a clear policy commitment of the government, as I understand it, that taxes will not go up. They will not raise a major tax rate or introduce a new tax. That is clear and unequivocal. If they were to decide to do so, they would have to get permission through a province-wide referendum. That's what I interpret: Those are commitments, they're clear, they're unequivocal, and they go out as far into the future as you care to think about. That, I think, sir, is the policy answer that I can give you. Technically, I used to be the chief economist of the province of Ontario when Mr Nixon was the Treasurer, and I wouldn't do five-year forecasts.

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Mr Phillips: Well, maybe you wouldn't, but I'm telling you that you are asking-the government's asking, not you-the government's asking us to sign on to a tax cut that cannot be changed without a referendum. You're not giving us any assurance on the health front. What we've got today is, all right, corporate taxes are going to be cut. The government wants the federal government to cut corporate taxes so that they're dramatically lower than the neighbouring US states. OK, we want to maintain our health care system, which gives our employers an enormous advantage. The government wants income taxes cut, they want capital gains cut. I just say, on behalf of the people of Ontario, who want their health care system maintained, where is that going to come from? That's not a tough question, and you say you don't provide five-year forecasts, but you, "you" being Mr Harris and Mr Eves, commented on the federal government's five-year forecast. You had enough confidence in that to say, "Cut taxes, because we believe there's going to be a surplus."

I'm not going to agree to a tax cut unless I know we can fund our health care system. We now have cut corporate taxes, we're cutting income taxes, capital gains taxes, and where will it come from? It comes from, I gather you're saying, consumption taxes. I gather that's where it's going to come from. On the one hand, you're asking us to buy on to-this bill benefits, really, the best off in our province, without question. The people who benefit from the capital gains tax cut will be the best off in our province; no question about that. And it's going to going to put health care costs, unless you've got another answer that I don't see, on to all the other taxes.

I say again, if the government's not providing some future plan for us and laying it before us and saying, "Listen, here's what we believe on the tax front, and we believe that will still provide enough money that we can fund our health care system, our education system and the other things," why would anybody sign off on it? If this were a business, believe me, we'd be laughed out of any board meeting.

Mr Phillips: In the ministry, when you look at costing future costs for various tax measures-you've outlined for us the implementation costs of the small business tax measures, which are for the next five years. You didn't use a five-year projection to reach that?

Dr Purchase: In that case, for certain, we would have looked at the cost over five years.

Mr Phillips: So you can do it for one tax. Why would you not provide the minister or the public with some information on what your expectations are; when we implement these tax measures, what your best cut is at how much revenue we will end up with in the province?

Dr Purchase: Because we don't do that.

Mr Phillips: Why not?

Dr Purchase: Largely because I don't think it's useful to do it. We don't make forecasts of what revenues we will generate from the corporate income tax, small business or large business, out for five years. I've just said that we don't do that. Again, this is a technical issue, but if the government were to ask us to do it, then of course we would do it. You mentioned the federal government. They've chosen to do it once again. Everybody did it back in the 1980s, and they were as useless then as they will probably prove to be now.

Mr Phillips: With all due respect, the Harris government commented on them, said: "We've looked at your numbers. You're going to have a surplus. Cut taxes."

Dr Purchase: We did. That's true.

Mr Phillips: So the government commented on numbers that they thought were useless?

Dr Purchase: No. You asked me for a technical perspective on five-year forecasts. I don't think they are particularly relevant. If you've ever looked at the probability of anyone getting it right, out five years, it's extremely low. These things are not useful exercises, in my point of view. Nonetheless, the federal government has chosen to do it. Incidentally, as I understand it, Mr Martin was very reluctant to do this. He had seen it done in the 1980s. It did not particularly help the federal government in its budgeting activities in the 1980s-

Mr Phillips: I'm sorry. Why then would we have-

The Vice-Chair: Please just let him complete.

Dr Purchase: In the 1990s, they are now going back to it, largely I suppose because it helped to frame a debate about potential surpluses. We simply took their information, their forecasts and what they say, given their best estimates of what the future is going to be-since they were involved in that exercise, demonstrating what they could do and what they couldn't do, we simply showed what they could do, given their forecasts, not ours: that they could in fact cut taxes, as we suggested, in terms of the employment insurance premiums and restore health care funding, as all the provinces had suggested, not just Ontario, and still wind up with a surplus. That's using their forecasts, not using our forecasts or engaging in any way in that exercise in a technical sense by producing new numbers or different numbers than what their technicians had done.

The Vice-Chair: Thank you very much. Fifteen minutes have been consumed. Would you like to skip or would you like to take your 15 minutes, Mr Christopherson?

Mr David Christopherson (Hamilton West): At least part of it. A number of things. First of all, Chair, I want to go on the record as saying what a sham I think this process is, and it's not the first bill like that. As I understand it, there's still a requirement that amendments be in before we hold our next meeting, which is just an absolute joke, and the fact that we're not having anyone come in, including the minister. I'm sure Mr Phillips made this point. If there's no one here to answer political questions, this is fine for a technical briefing, but quite frankly we could have done this with our staff talking to his staff. Involving the politicians with the staff only as the whole process of committee work is just such a joke and is obviously meant to lead to nothing.

Having said that, I'll take some of the 15 minutes to raise a couple of issues, but again I want to recognize that I don't and my caucus does not consider this to be any kind of legitimate give and take at a political level, which is what should be happening, on the whole issue of the budget.

Just a couple of things if I can, through you, Chair. Number one, I'd say hello to former friends from the ministry, and I won't limit anybody's career by naming names. You know who you are. We'll leave it at that.

First of all is the breaking news that the auto pact may indeed be on the scrap heap according to the federal minister in terms of the clip I saw last evening. We know that during this whole process in the ramp-up to the budget, during our pre-budget consultations, virtually every economist who came forward, whether they were considered to be on the right, the left or the middle of the political spectrum, acknowledged that much of our current economic boom is due to the American economic boom, specifically the auto sector, and a recognition that if there's a downturn or any kind of damage to the auto sector, we're going to be in serious trouble. Now we've got this ruling and a federal minister saying that basically the auto pact is dead.

I'm wondering if you'd be good enough to comment on how you see that affecting our future, given the absolutely critical importance of the auto industry to our current economic benefit.

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Mr Graham Stoodley: Mr Chair, I have a question for the committee. I understand fully that we will answer and need to answer what is appropriate to bring before the committee in the discussion of this bill. My question simply, because it relates to the degree of preparedness of my colleagues and I in coming to the committee, is if the questions relate to matters totally outside the bill as, for example, the effect of the auto pact-a perfectly valid economic question, and no doubt one on which we would like, in due course, to make a statement-my concern is that we wouldn't have prepared for it and it doesn't relate to any provision of this bill. I fully understand that it's your ruling and your decision as to how wide-ranging this discussion should be and as to how hypothetically we, as staff members, may respond to the committee. I raise the issue with you only because I fear we won't be very well prepared to answer such questions.

The Vice-Chair: Your point is well taken, and you don't have to respond if you don't want to. The committee hearing is based on this particular bill. You may have some feelings on the question. If you don't, I know, as Mr Christopherson just made reference to, it was just on the news last night, so I can certainly appreciate your difficulty in responding to it.

Dr Purchase: Mr Chair, if I may, I will respond in part to it. But my colleague's intervention was appropriate in the sense that I haven't yet been fully briefed on the implications of the auto pact. I was aware, obviously, of the difficulty that the auto pact was in with respect to the World Trade Organization's rules. I did have a briefing some months ago about the options that may be before the federal government now to respond to this. As I recollect, it's not as dire an implication now as it perhaps would have been in the 1970s with respect to that particular agreement. But I don't want to minimize it, and I should be careful about how much I would say about it.

I did want, however, to comment on the issue that you raised with respect to our dependence on US exports. As you know, exports to the United States are roughly 90% of our total exports. Autos, I believe, are about 50% of that or in that neighbourhood. My staff would correct me with the precise numbers, but I'm probably close.

No one would say for a second that autos are not a very important part of the Ontario economy. I think something like 18% of manufacturing employment is in autos. Now, employment in autos is a lot less of the provincial economy; the share of the provincial economy is a little over 3%.

Those are some numbers to give you a little bit of flavour for the size of the sector we're talking about. As I say, I don't know how important per se the auto pact is now, relative to other issues, given that we have Toyota and Honda and so forth all located here in Ontario, something we didn't have when we started with the auto pact. Having said all that, it is repeated many times, and I think it's incorrect. Technically we should try to get this right.

In terms of the growth of this province, the sources of growth in the province over the last five years, since 1995, the export sector, net exports-I'm taking into account exports going to the same ports-have contributed only about 16% of the growth. This is a fact. The domestic economy has generated 84% of the growth in the Ontario economy.

Attribute that to what you may. The fact is that it is not true that we are entirely or wholly dependent on growth in the United States or in any one sector for the growth of the Ontario economy. I see this repeated over and over. And you mentioned, Mr Christopherson, many economists-many economists who should know better, it seems to me-have repeated this in public. It is simply not factually correct. I just put that on the record in response to that.

Mr Christopherson: If I can, then, I would first of all argue that it's very much germane to Bill 72, given that they're talking about tax reductions and what that's going to do in terms of the economy and therefore talking about revenue. When we talk about revenue, we've got to be talking about exports and imports. I don't know how anybody could sever this off and say that this is not a part of the discussion of Bill 72. I can understand that you may not be prepared today to give detailed comment on something that's late-breaking news but to suggest that an issue that big and has such a play in our economy is not relevant to a major budget bill, I have to confess with great respect, is a bit of a stretch.

Mr Young: Mr Chair, I think if he's going to quote Dr Purchase, he should do it accurately. He didn't say it was not relevant.

The Vice-Chair: No, Mr Christopherson has the floor.

Mr Christopherson: Thank you.

Mr Young: We have to be fair to the individuals who are coming today to present information.

Anyway, I still would make the point that I think it's very relevant to the bill that's in front of us. With regard to your comments, Dr Purchase, again, this is where it's difficult. This is staff. This is debate that we ought to be having with a politician-there are a lot of things I want to say right now, and I don't feel that it's appropriately said to staff-but of course the government's made sure it's not going to happen.

What really ought to happen is, following this kind of presentation we ought to give these very economists who disagree with Dr Purchase's criticism a chance to make a comment on their own. That's not going to happen, because the only people who are coming in here are the minister's staff and the bureaucrats from the staff. It's just so unfair to everyone involved here.

But I do want to state that I suspect, given the amount of lobbying that went on a few years ago, as I recall, from both the Canadian Auto Workers Union and the auto makers themselves, around any kind of reduction or elimination of some of these federal tariffs, they consider it to be pretty important and not just something that was relevant in the 1970s. It seems to me there's at least a legitimate debate, rather than dismissing it saying, "They're wrong." It seems to me there's at least a credible democratic debate that one can have around this. I'll ask another question if you want to comment in response; I see you're anxious. Please feel free.

The second thing I wanted to ask about specifically was the development of the policy-as much as you can, again, not being the political masters in this case-around the $200 rebate that leaves out everyone who did not pay enough income tax to generate an amount of $200 or a portion thereof, thereby leaving out the people in society who, arguably, could use the $200 the most and for whom $200 might make a difference. Can you comment on the thinking behind eliminating about a million people from receiving the $200, given that they need it most?

Dr Purchase: First, Mr Christopherson, I didn't mean to imply for a second that the issue around the auto pact and the WTO was not potentially important. I thought I was careful to couch my remarks in saying I really don't know. I remember being briefed on it at one point. The issue isn't as big now as it would have been several years ago, largely because we have other trade agreements in place which we did not have at the time we had the auto pact. I would be happy to talk to the economists and the auto workers and so forth, whom incidentally we quoted in budget paper E on the beneficial effects of corporate income tax cuts for that sector and for all sectors-and for workers, not just for corporate capital, if you like. So we relied very heavily certainly on that study and other studies in taking our own look at these issues.

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I was only really responding in terms of the public debate between those economists who claim that we have been totally dependent for our growth on what's going on in the US. That's simply not true.

Mr Christopherson: I don't think anybody was arguing about "totally"; I think they were arguing-

The Vice-Chair: Let Dr Purchase answer.

Dr Purchase: What I'm saying is, the truth is statistically the other way: 84% of the growth was domestically generated, not generated in the export sector.

Coming back to the second question: The $200 rebate is for those people who paid any Ontario tax. You had to pay in order to be able to get a refund. Even if you paid $5, you'll get $25 back, which is our cut-off point for a refund. This is a refund of tax, so if you didn't pay tax, you don't get a refund.

Mr Christopherson: Thank you; I appreciate that.

Just on the other thing-

The Vice-Chair: Very quickly-about 30 seconds.

Mr Christopherson: OK. Then let me just say that anybody who knows me could probably imagine what my responses would be and what I'd like them to be, but they would be totally unfair, given that this is staff. Again I want to emphasize the minister ought to be here to answer these questions, because this is just not the kind of debate that is serving anybody in this province.

The Vice-Chair: Thank you, Mr Christopherson. To the government benches. Who would like to lead off?

Mr Young: I wonder if I may, Mr Chair. I do appreciate this opportunity.

By way of preamble to my question, let me note that some of the previous questioners have commented upon the fact that this government made some submissions, formally and otherwise, to the federal government, in anticipation of their most recent budget. While it is accurate to suggest that this government asked that taxes be lowered as part of the federal government's announcements relating to the budget, unfortunately there was no reference to date at this committee of the fact that we also asked that health care funding be increased substantially. That balance is important to recall in many of the discussions that have taken place here today, not only with reference to our submissions to the federal government but also in our announcements relating to our own budget and other policies; that balance has always been there and continues to be there.

There has also been a great deal of discussion this morning, particularly coming from Mr Phillips as one of the representatives of the Liberal Party today, about predictions and forecasts, prognostications. I understand why it is of some import for him to want to attach a particular figure to this initiative or to that initiative. I'm certain he has done that in the past. I have a recollection, back in November of 1998, of Mr Phillips, or certainly some of his party members, predicting lower economic growth. I think a 2.5% figure was utilized. Fortunately, 5.4%, I believe, was the figure that actually came forward. Certainly when members of the opposition throw around figures, it's important that they ensure that they are figures that are based on precedents and performance.

What I want to know from Dr Purchase and his colleagues who are here today is, where do we look in order to determine a likely outcome of these initiatives? Ireland is quite often used as an example of a country that has taken some innovative measures towards tax cuts-lowering corporate tax rates, continuing to have a social structure. I want to know if that was considered in the deliberations that Dr Purchase and others were involved in leading up to the budget announcements.

Dr Purchase: Yes. Mr Young, as you know, in budget paper E we have documented a number of studies, and there are many more studies in increasing number, that are moving on to this matter of the profound productivity improvements that can take place with fairly large and dramatic reductions of the corporate income tax. Certainly that was the case in Ireland, which is maybe the most spectacular one. Ireland started off well behind other countries in Europe, well back of England, and has now simply caught up, has closed the gap. Meanwhile, I think this issue of productivity in Canada vis-à-vis productivity, performance, real income, if you like, in Canada vis-à-vis the United States is a major problem for us. The United States has had an enormous productivity improvement relative to us, so we've been losing ground overall in the 1990s and only in recent years have begun to close the gap a little bit again.

Most of the work on corporate income taxes, and I might ask Mr Howell to say a few words about this as well, is really going to point to several areas of benefit. It's clear that if you improve the after-tax rate of return on capital, you're going to increase the amount of capital investment. Increasing the amount of capital investment provides labour with a great deal more equipment to work with and enhances their productivity and enhances their pay in the long run as a result. So there's that immediate effect.

Also, because we're living now in a world, for better or worse, where our capital is extremely mobile internationally, we simply have to care about our competitiveness-tax competitiveness, if you like-vis-à-vis other jurisdictions. If we are wildly out, then it will adversely affect in the long run the amount of capital that will choose to locate in Canada, and in Ontario in particular.

That, I think, is well documented by any number of studies. There is an increasing number of studies by the C.D. Howe Institute. I mentioned the study by Jim Stanford, who I think is the chief economist for the Canadian Auto Workers, who is also on record as saying that corporate tax reductions are of great benefit to the real incomes of workers.

We think there is sufficient analytic evidence, done by different sources, whose integrity in this regard is not to be impugned, I think, to warrant the kinds of responses that are in this budget.

Mr Young: Did one of your colleagues wish to comment?

Mr Philip Howell: I'll add a couple of comments to that.

One thing that's worth noting in the context of the Irish experience is that the corporate tax cuts were only one part of a fairly comprehensive program to promote economic development that also included substantial personal income tax cuts and also had a focus on boosting infrastructure spending. So it was not just the corporate tax cuts that were responsible for the substantial gain in growth in Ireland.

I might also note that the government's revenue gains over the last decade in Ireland have been substantial and far outweighed the revenues associated with the cost of the tax cuts.

Another thing that was interesting in the work we did was to find that in jurisdictions like the Scandinavian countries, which have a reputation for very high levels of publicly funded social programs, it was noteworthy that in all cases their corporate tax rates, their combined corporate tax rates, were in the 20% to 25% range, the kind of number we'd like to move towards in Ontario. I think that underscores their recognition of the important role, especially in small economies and especially in periods when capital is moved very easily, to put in place conditions that ensure businesses will be able to generate the types of after-tax returns that will encourage them to keep investing in that jurisdiction and creating more jobs.

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Mr Young: If I may-I know my colleagues have some questions as well-in citing the success of Ontario's economy over the last year, I mentioned 5.4%. Was that the net growth rate or are we just looking at the last quarter when we talk in terms of 5.4%?

Mr Howell: It's 5.7% for the year.

Mr Young: Annualized?

Mr Howell: Yes, that's the annual.

Mr Young: The other question I want to pose before I yield to my colleagues is the role of small businesses in what is a very large economy of this province. I wonder if I can get the presenters to comment upon that. They have been asked some questions about the five-year set of initiatives that have been set out in the budget announcements. I wonder if we can hear what role it is anticipated small businesses will play as part of this province's economy.

Dr Purchase: I will ask Mr Howell to respond to that.

Mr Howell: Small business has always been an important source of job creation in any economy, and equally importantly they're the source of future large companies, obviously. Not all small businesses grow into large businesses, but nevertheless ensuring an environment in which businesses are able to start up and prosper and expand is an important economic development objective.

In that context, with small businesses, one of the reasons they've always had lower tax rates is that you want to not only encourage entrepreneurship but ensure there are funds available for reinvestment by these businesses as they expand. Currently in Ontario over 40% of employment is accounted for in the small business sector, so it's clear that it's an extremely important part of the economy. While it is true that in the last few years, with the strength and growth of the economy, many large businesses have been expanding, it's also true that small businesses historically continue to be a primary source of job creation in the province.

Mr Ted Arnott (Waterloo-Wellington): This Bill 74 proposes fairly substantial cuts in corporate income tax rates, as has been discussed-

Interjection: Bill 72.

Mr Arnott: Bill 74 is on my mind; people are phoning me about it and sending me e-mails.

It proposes fairly substantial reductions in corporate income tax rates, which has been discussed. Of course, it continues to appear that the opposition parties reject fundamentally the stimulative effect that has been created in the past five years as a result of income tax reductions in Ontario.

It's interesting, as you pointed out, in budget paper E, the effect of tax cuts in Ireland in recent years. You talked about the corporate income tax rates in three of the Scandinavian countries-Norway, the Netherlands and Denmark-that we traditionally think of as being perhaps more socialistic in terms of their economies, yet they have considerably lower corporate income tax rates in those countries: 28%, 35% and 32%. You indicated in the budget paper that the rate is about 45% cumulatively in Canada.

You've also talked about how the new orientation in Ireland to cut income tax rates, whether it be corporate income tax or personal income tax, has led to a dramatic turnaround in that country. The leader of the national Conservative Party, Joe Clark, has talked about Ireland in some of his recent speeches. He is someone I continue to support; I'm proud to say that. I think you've highlighted something that's very significant.

When we talked about this in the last round, you mentioned there were other factors at play in Ireland that you thought could be identified as reasons for that growth, not just tax cuts. One of you talked about infrastructure spending. Would you care to elaborate on that a little bit, because I think it's important to see the whole picture? It appears from what we've seen here that income tax rate reductions have contributed significantly. You said there might be other factors. We don't want to just look at this in isolation.

The Vice-Chair: You have about one minute for the response.

Dr Purchase: Mr Howell may have something to say, but as indicated in that budget paper and in the government's overall economic and fiscal strategy, it's not just about efficient government or keeping the costs of government programs to the most efficient or effective level; it's also about reinvesting in the core strategic infrastructure of the province: in roads, hospitals, post-secondary education and research and development. The budget did do all those things. The government has indicated its commitment through SuperBuild Corp over a period of five years.

It is absolutely key that we continue to invest in those things to support the expansion of the economy that has happened and we anticipate will continue to happen in response to the corporate tax cuts and the personal income tax cuts.

The Vice-Chair: We move on to the official opposition.

Mr Kwinter: Again I have to qualify my remarks. It's unfortunate that I have ask you questions that may have a bit of a political slant to them-I have no choice-but I want to try to keep it as even-handed as I can. You talked about your projections and you can't go five years out because two years are possibly manageable. Why were you not able to predict the surpluses we had so that the budget could've been balanced last year before it happened, as opposed to after it happened where they went back and said, "We had these revenues that we had no idea were coming in; we're going to go back and balance last year's budget," which I think is unprecedented? I've never heard of that before, where you go back and balance the budget.

Dr Purchase: That's a legitimate question to ask of us. Why did we not know? The answer is that the way we do our forecasts, to reassure the public and all the members of the Legislature that they're getting the straight goods, we take the consensus of private sector forecasters and we shave off a bit and adopt that as our forecast, so we're never very far from what everyone else in the community is saying, even if inside we think, "They're probably wrong." What we want is to be prudent and also be credible in what we're telling the Legislature is our best guess about the future.

The fact that we were wrong and so dramatically wrong-one nice thing is that when you're wrong, you're wrong because everybody else is wrong at the same time. Why were they wrong? Why were economists so wrong about last year? Our original forecast was 3.6%, in that area, of real growth. We came in at 5.7%. Actually the nominal GDP was even more dramatically up.

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There are two explanations for why everyone got it so wrong. The first is that in the fall of 1998, if you'll recall, there was the Asian crisis when all the Asian Tigers' economies suddenly went flat. Output was falling dramatically in those countries. Then there was the international capital market crisis with Long-Term Capital, the major US financial house that got itself in very big trouble. All the heavy hitters on the US financial scene came to the rescue because they feared that if they did not-this was all under the general direction of the Federal Reserve in the United States-they could have a worldwide financial calamity on their hands.

That really chilled out everybody. Everyone thought, "Oh God, here it comes, the economy is about to go into a stall." The Federal Reserve, if you recall, at that time had a 75-basis-point reduction of interest rates, 25 basis points at a time, to help support the economy and so forth. Then suddenly, four months later, everything is not only fine but growth is steaming ahead.

It turned out that the problems in the Asian economy, perversely, helped the American economy and the developed world's economy because it kept a lid on prices. It didn't impact at all on aggregate demand in the industrial world. That kept booming ahead to the point that you had very strong consumption spending growth and investment spending growth with very little pressure on prices. With an accommodative monetary policy, suddenly our economy grows at 5.7%

Mr Kwinter: I'd like to ask you another question; I know my colleague wants to ask you another question. In your presentation to us, you talked about cutting corporate income tax rates. It seems to me the raison d'être that has been given to you is to enhance Ontario's competitiveness. When I was the Minister of Industry, Trade and Technology, I used to get on a regular basis from the Ministry of Finance a spreadsheet showing our competitive tax situation vis-à-vis our competitors, basically the Great Lakes American states, Quebec: Is that still provided?

Dr Purchase: We certainly have that. I assume we provide the ministry with that information. I think they publish it in a document that-

Mr Kwinter: The point I'm making is that when I used to get that, it used to show that we were very competitive, all things in. I used to use it all the time when I was discussing with people why they should be investing in Ontario. What has happened since then that has made us non-competitive, that means we have to reduce our taxes?

Dr Purchase: Quite a few things have happened since then. The US economy has had a very dramatic improvement in productivity performance in the 1990s. This is a movable feast. You have to keep moving along with the competitors. On the tax front they have also moved in the United States to reduce taxes. There's talk about further tax reductions federally in the United States, depending on who wins the presidential election. Michigan has a proposal on a single business tax to eliminate corporate tax altogether.

These things are happening in the United States now. There are, as I say, a number of reasons, all of which compound to make us concerned about our tax competitiveness. It isn't saying, "Let's just stay equal." The Irish example shows that there is some benefit to getting ahead if you can get ahead.

Mr Phillips: This is a frustrating exercise, because the issues that we're keenly interested in are policy issues, and it is grossly unfair to the staff to ask them to deal with the policy issues, because they won't and they can't.

I understand the corporate tax rate decrease, and it is a moving target. Michigan will reduce it-here is no question about it-and New York State will. We're chasing a moving target and it's a race to the bottom on the corporate side. They have the same Irish statistics that we do. We'll be back next year with them dropping and us dropping. That's not the issue. I would point out that the Denmark, Norway and Netherlands situation is part of the policy discussion. As you point out in the document, they've cut corporate taxes, but their overall tax burden is higher than ours. So they make it up elsewhere with some other taxes. The discussion we should be having here is, OK, we'll cut the corporate taxes. We should expect that next year we'll be back again looking at them, because, as I say, they're all running surpluses. They're all going to change.

I would love a discussion on the importance of exports. I think I fundamentally disagree with you on the importance of exports. You've said that 84% of Ontario's growth is domestic spending. I have a different view of it. You subtract imports from exports. I'd love to get some other economists in here, because if you really believe that exports are only 16% of the economy, I think we've got a problem. I think it's fundamentally driving our policy now, but if the senior staff at the ministry don't think that and others do, we'd better have a debate and try and join that issue. If our policy is being driven by the belief that exports aren't really that important, "They're only 16%," we have a huge problem.

The debate here should have been around-all right, we're making the decision to cut corporate taxes. Once you start down that road, I think you're on the road where it will just snowball down. In my opinion, we're going to have to make it up elsewhere to fund our health care system. That's the policy debate. Does it mean sales taxes are going to have to go up? If corporate taxes are going to go down and you say the Irish experience is that revenue will go up, I'd love to see us model that one for ourselves and say, "All right, we're not worried about the corporate taxes, because, overall, this thing is going to be like a money-making machine."

There is huge pressure on us to reduce income taxes because of the "brain drain," and the business community is putting enormous pressure on. If corporate taxes and income taxes are going to be lower than the US or equal to the US, where do we make it up? It's not the federal government, because Harris has said, "Cut income tax, cut corporate tax." There's only one taxpayer, and that's going to be cut.

The bill is quite technical. I have maybe one or two questions on the bill. It's the whole policy side. All I do is get angry with the deputy when I think that the government owes the public a discussion of: "Here's where we're heading. We have decided that we have to get our corporate taxes down and we're going to have to keep them below the neighbouring states." Believe me, that will be challenging. "For the best-off in our province, we're going to have to give them more tax breaks." That's capital gains. In the R and D area, I gather it's $100,000 tax-free, costing $70 million. OK. Now, let's debate how we make that up.

This is an exercise in frustration for me, because that's the debate I think we should be having, not the formula in Bill 72 that determines the corporate tax rate for fiscal year 2000. We are going to frustrate ourselves. I don't know where the forum is going to be for us to have that debate because it's clearly not here, unfortunately.

Having said that, I do have a technical question on the tax rebate. On page 28 of their blue books it says, "The provincial minister will send the individual a notice of entitlement, a notice of the right to appeal, and pay a rebate." I gather that's one mailing that will go out with the $200 or whatever refund in it. Is it the expectation that the minister will send a notice out?

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Mr Sweeting: Yes. We're currently in discussion with the Canada Customs and Revenue Agency about the actual mechanics of the rebate. But certainly the act requires that the person be informed of the size of rebate and why it was that size, so that they have an opportunity to, if necessary, challenge the determination process, the administration process for how much rebate they're entitled to.

Mr Phillips: Just to go back on my overall comment: As I say, we had a technical briefing from the staff and we asked our technical questions then. This was to be around a policy discussion of where we're heading from a policy point of view.

I happen to think this export issue and the implications on our tax policy is the most important economic issue, and we need a debate. We're heading down the road-without the debate taking place-of, "All right, where do we find the funds for our health care system?" I don't know whether you, Deputy, can be helpful to us in terms of where does the future money come from for health care.

Dr Purchase: I would like to first of all say that although I said that 16% of our growth in the last five years has come from net exports, I don't say that to minimize in any way the importance of exports to the Ontario economy, particularly, in that regard, the importance of exports to the United States. As I said, they are 90% of our international exports. So we are very conscious of our competitive position vis-à-vis the United States, just as I'm sure Ireland's target wasn't North America, their target was continental Europe.

We know the larger economy we live in. In our case it's the North American economy and in particular we are, like it or not, in competition with largely the Great Lakes states. They're part of what I would call the Great Lakes economy. So, Mr Phillips, I would agree with you and your sentiment that the matter of exports to the United States is of fundamental importance to the Ontario economy. Nothing in my remarks should be taken to intimate for a second that I don't think that is the case.

With respect to where does the future money come from to pay for important social programs, not just health care but education and so forth, I think that is also a legitimate and important issue. At the end of the day, we tax not just because we like to tax. We tax to raise money, principally; otherwise, I would presume that no tax would be the most appropriate thing.

The Vice-Chair: I think we're going to have to move on to the third party.

Mr Christopherson: Again, my comments and my discussions need to be of a political nature. It would be totally unfair to the staff who are present. With that, my hands are tied. There's nothing further I can do to advocate for or discuss the issues that matter to me and my caucus.

The Vice-Chair: We'll move on to the government caucus. Who would like to respond? Was Mr Arnott finished?

Mr Young: I'll jump back in, and I think some of my colleagues will join us later. By way of a historical perspective and in an effort to try to learn from what has gone on in this province, particularly over the last five years since Mr Harris was elected as Premier, I wanted to get Dr Purchase and his colleagues to comment on what has happened to revenue within this province, whether we have seen a decline overall or whether we have seen growth since this government started to cut taxes in a very significant way. Have we made up the money that would otherwise have been gained through the numerous taxes that were cut?

Mr Howell: Over the past five years, total revenues have increased I believe by $11.7 billion.

Mr Young: Sorry. What was that number?

Mr Howell: It was $11.7 billion. Again, going back to the Irish experience and other jurisdictions where similar experiences have occurred, with bold tax reduction strategies there is a very positive impact on economic growth. The stronger economic growth and the accompanying increases in employment obviously broaden the base against which tax revenues are assessed and partially explain the increased revenue.

Mr Young: Do I have it right then, that even with all of the tax cuts, the Ontario coffers have been increased by $11.7 billion?

Mr Howell: Yes.

Mr Young: Are you in a position to also comment upon whether health care funding over that same period has increased or decreased within this province?

Mr Howell: Health care funding has increased over that period.

Mr Young: Do you have a figure that you can share with us today?

Dr Purchase: It's currently $22 billion and I believe it was $17 billion.

Mr Young: So with all these tax cuts, we've seen increased revenue and we've seen increased spending on health care.

Dr Purchase: That's correct.

Mr Young: I thought that was the case but I appreciate the particulars that you provided to us today.

If I can change gears to some degree and talk about another initiative that is outlined in the budget papers, and that is the rebate or taxpayer dividend that will see taxpayers receive back up to the first $200 in taxes that they paid last year: Can you help us with any similar initiative that has been conducted by another government? Is there any precedent for this sort of rebate?

Mr Sweeting: Yes, there is a precedent back in the 1970s when the federal government delivered cheques to residents of Quebec directly, of up to $85 each. There had been an agreement worked out between the federal government and the provinces to deliver a federal reduction via the income tax systems. In the case of Quebec, the federal government used a direct sales tax rebate mechanism in order to compensate the people of Quebec and provide them with a rebate of their sales tax.

Mr Young: I believe it was a Liberal government that was in power at the time, but what you're saying is that they used a similar sort of rebate program to return money to the residents of Quebec.

Mr Sweeting: Yes.

Mr Young: Sorry. Do I have that right?

Mr Sweeting: Yes, the individual cheques were mailed to every Quebecer.

Mr Young: I'm embarrassed to say this as a student of politics but my memory is faulty. Can you help me as to who was the finance minister at that time?

Mr Sweeting: I think it might have been Mr Chrétien.

Mr Young: I thought it might have been but I wasn't sure. The current Prime Minister embarked upon a similar endeavour?

Mr Sweeting: Mr Chrétien, I think it was.

The Vice-Chair: Mr Kells, go ahead.

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Mr Morley Kells (Etobicoke-Lakeshore): Actually, this is more of a personal inquiry. In one of my previous incarnations I was president of the Urban Development Institute and we were down here pretty regularly trying to get that land transfer tax lifted. Of course, I'm aware of what we've done as a government and I also realize that it's a great help to first-time homebuyers, naturally, and also a great help to the industry. I'm just wondering what scale or what amount of money annually had we been taking in prior to this reduction or our lifting it, our finally taking it off. What kind of revenues are we talking about?

Mr Sweeting: I don't have the figure. I'm sure we can get it for the annual take from the land transfer tax. I can tell you that since the refund program has started it has reduced land transfer tax or provided benefits to first-time purchasers of homes of $82 million in refunded land transfer tax. That has been effected by 62,000 people. The land transfer tax itself is $486 million. That's how much was collected overall from land transfer tax.

Mr Kells: You weren't up against it, but yesterday we had the real estate association running around the building. Naturally, they feel that they'd like this largesse to maybe be expanded to take in resales. It seems to me that's probably out of order, obviously, because it could go on forever, or as you know, it would go on forever. What kind of money would we be talking about if we were in the kind of good year that this appears to have been, if you were ever to do it in the area of resales? I'm not expecting you to be precise for obvious reasons, you can't be, but on a scale what would we be talking about?

Mr Sweeting: I don't have a good sense of that, Mr Kells. It's clearly larger. Used home sales are in excess of new home sales. We do feel that the stimulation to construct new homes has a lot higher economic spin-off than does the support for resale purchases. Part of it is economic-based in terms of the policy for permanentizing land transfer tax rebates.

Mr Kells: I couldn't agree more, and actually, I think I used similar words to tell the real estate people what I thought of their chances.

Just before I finish, I would like to do a little sidestep into something else that's bothering me, and I know that down the road, the ministry will probably be faced with this. It's interesting that the members opposite mentioned the fact that we don't do five-year forecasts in revenue, only two. I have a concern that when it comes to Olympic guarantees and waterfront development down the road we're going to be asked to put monies up over a much longer period of time. I wonder, if we don't forecast revenue, how are we going to forecast our ability to do things like $2-billion guarantees and even greater amounts of money in the area of the waterfront? How are we going to look at that, even under something called SuperBuild?

I think it's going to come up and it's an interesting question. I wonder, from our own government's point of view, how the Ministry of Finance is going to come to grips with that. I hope it never has to, by the way, but if it should.

Dr Purchase: When and if that happens, then we'll take a look at the implications. We know, for example, that our health care spending isn't going down, education spending isn't going down. These things are all out there in our future. While it may not sound wholly satisfactory to you at the present time, believe me, we will deal with that issue when it comes up, and look at the implication that it has for us. We'll have a complete and full debate internally with the government on the potential implications for our finances at that time.

Mr Kells: I appreciate your answer. Again, from my own point of view, I'm wondering if we should drift into these things or make a conscious decision to get into these things where the province could ultimately be, if you will, the mortgage holder of some down-the-road, fairly large expenses. Do we have anything in the past remotely that would compare to that kind of a scenario, where you make an open-ended five- or 10-year commitment to costs for the Ontario taxpayer?

Dr Purchase: I really didn't come prepared to respond. I don't know. I can't think of anything right off hand, but that doesn't mean that there aren't-

Mr Kells: I appreciate your answer. Actually, from the political point of view, where I'm coming from, I can't think of an answer. I know that the Ministry of Finance must be looking at these potential demands that could be placed on you in this area. If you aren't prepared to give an answer, and I can understand why-I'm sure that down the road you're going to be asked-I was wondering, are there any deliberations taking place, for example, on the Fung task force report? The implications there are huge.

Dr Purchase: Yes, certainly all of that is being reviewed.

Mrs Tina R. Molinari (Thornhill): I just want to focus on the made-in-Ontario tax system. Can you talk a little bit about the impact on a separate income tax system and the transparency the tax burden will place on Ontarians?

Dr Purchase: I'm sorry, I didn't quite-

Mrs Molinari: The made-for-Ontario tax system, the separating, the impact this move will have and the transparency of the tax burden that we place on Ontarians.

Mr Sweeting: The new system will involve the application of Ontario income tax rates to taxable income directly. Previously the Ontario income tax system was set as a percentage of federal income tax, so the taxpayers calculated their taxable income, then they calculated federal tax based on federal brackets and federal rates, and then the Ontario tax was simply a portion of that result. There are certain programs the province has brought in to try and modify that with respect to objectives that the government has for low-income relief and higher income taxes, but essentially, ours was masked in behind the federal system. With the new system, they will clearly see Ontario's rates of tax in the progression, how it compares to federal rates that are applied to the same income, and of course with every other province apparently going to move to a tax-on-income bracket, there will be a clearer transparency across. So it will be clearer how governments are determining their revenues and what is the relationship between levels of income at the provincial level.

Mrs Molinari: So this will make it more clear to those who are claiming that they haven't seen any tax reduction. Ontario has been reducing taxes for the last five years and there are some who are claiming they haven't seen it. If the feds increase the taxes and Ontario decreases the taxes, then at the end of the day they don't know where it is, but this will clarify what Ontario is doing compared to what the federal government is doing?

Mr Sweeting: That's true. The end result of what tax you pay in Ontario, to Ontario for personal income tax purposes, will reflect a determination by the government of Ontario of how big credits should be, whether they should be higher than they were in previous years, reductions in tax, whether rates should be lowered, whether they should be lowered in all brackets or in particular brackets and whether or not brackets should be widened so that, say, more income is taxed at a lower rate than was the case previously. All of that will be clear and comparable to the year before. Currently it is very difficult for people to see those differences through the tax-on-tax system.

The Vice-Chair: You have another minute here.

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Mr Arnott: Mr Phillips asked an interesting question about health funding. It's his thesis that as we reduce corporate income taxes and personal income taxes, our ability to fund the health care system is diminished, if I'm not mistaken. He can correct me if I'm wrong but I think that's the point he's making. I think it's important to point out that when we took office in 1995 the expenditure on health care was $17.4 billion a year. This year it's budgeted to be $22 billion, which is an increase-I don't know what the percentage is-in excess of 20% of the health expenditure since we took office. At the same time, the federal government has reduced transfers to the provinces, through the program that supports health care called the Canada health and social transfer, at an annual reduction of $1.7 billion.

This week, our health minister was at a health ministers' conference and the provinces unanimously, all 10 provinces including the Liberal government in Newfoundland, the government of Brian Tobin, supported our minister's call for complete restoration of the reduced health transfers through the Canada health and social transfer.

It is certainly the contention of the government that, assuming the economy continues to grow, the expenditure for health that's budgeted at $22 billion this year is absolutely secure in spite of the fact that the federal government has persisted in its policy of cutting our health transfers. Am I correct in that?

Dr Purchase: Yes, that's correct. In fact, the government's target that was laid out in the Blueprint of-someone help me here-

Mr Sweeting: It's $22.7 billion

Dr Purchase: -$22.7 billion will obviously, in all probability, be reached next year.

The Vice-Chair: That sort of runs out the time allocated. Now, we have one party that skipped, did not consume their rotation. I'm in your hands. Would you like to take five minutes for each party? I know we're into discussion for this afternoon. I have no structure for that, if you want to discuss that kind of structure.

Mr Phillips: I'd like another five minutes, please.

The Vice-Chair: You'd like another five minutes?

Mr Young: Why don't we each take another five minutes?

The Vice-Chair: I'm happy with that, sure. I'll be generous with the five minutes and that'll probably take us up to voting time.

Mr Phillips: Thank you. Just to again say what I said a couple of times, and that is, I really believe that the province needs a policy discussion on tax policy. We, the federal government, governments around the world, are looking at reducing corporate taxes. As I say, we're going to be chasing a moving target. I think it has profound implications for us. With the brain drain we're looking at pressure on income tax and we have to figure out how we therefore fund our essential services. That's not a partisan comment, it's just reality, and I regret that we haven't found the format for that.

We were told by the government caucus to use question period. I really resent that. I just don't think question period is designed for a discussion of important, fundamental policy issues. We had better have it soon.

But back to things that I can ask you and you can answer, I hope. The government announced a 20% cut in personal income tax a year ago and the budget, on page 65, restates that. Last year's budget implemented the first five percentage points of it. How far are we now with this budget to the full implementation of the 20% cut and how much is still to go?

Dr Purchase: I'm trying to remember-do you remember the numbers on-

Mr Sweeting: I don't remember the numbers off hand. I do remember that the minister's expectation in the budget was that by next year the 20% will be met with the 2001 budget. I don't remember offhand the measurement of the progress so far. I mean, there have been-

Mr Phillips: Is that something you could give the committee? I'm just anxious to know-

Dr Purchase: Could I get back to you? I can't recall just what the total number was on that but I think I can supply you with that information.

Mr Phillips: Is there any indication how the remaining is to be implemented?

Dr Purchase: No.

Mr Phillips: Does the table on page 115 give us indication of how far that is, the four-year cost or benefit of the tax cuts? Does that give us any indication of how much more there is to go on the 20%?

Mr Sweeting: Yes. That's part of the answer. The table on page 115 indicates the benefits to taxpayers from the moves in the budget. There's a full-year benefit identified of close to $3 billion-well, don't count the rebate-close to $2 billion on top of the 5% rebate last year.

Mr Phillips: It would be helpful for us, Chair, if the staff could let us know-there was a 20% cut; 5% last year and 15% to go-how much is implemented with this.

Second, can I ask a question on capital gains, just for information? What is the rate in the US for capital gains currently?

Mr Sweeting: The rate for capital gains varies. I think if I go skipping through enough papers and conscious of the time, I would have that answer.

Dr Purchase: We can get that for you, if we don't have it.

Mr Sweeting: It differs depending on short-term, long-term gains, and there were some recent proposals in the US. But we do have that, so I'm happy to provide that to you.

Mr Phillips: I realize that's not part of the bill, Mr Chair, but it would be helpful. I view this as half of the package or thereabouts. What legislation do we need to implement the remainder of the budget? What still has to be legislated?

Mr Sweeting: There would still be legislation for capital gains. There will still be legislation for the stock option deduction. I'm not sure what else we've still got to legislate.

Mr Phillips: What is the expectation of when that legislation may come forward? I gather the implementation dates have already been announced. Is this simply enabling legislation?

Mr Sweeting: Yes. As has been the case in the last several years, there will be plans for two budget bills: the current bill that you are examining and then a bill in the fall that will cover the matters that I had mentioned; and, as well, matters such as the educational technology tax incentive, simplifying the film tax initiatives, expanding the sound recording, book publishing, interactive digital media credits. So there are still a certain number of measures to be included in a proposed possible fall bill.

Mr Young: I noted with interest that the government was intending to commence and perhaps has already commenced a consultation process with respect to the point-of-sale exemption for farm building materials. My question to those here to present and respond today is, what is the government consulting about, why is this consultation necessary, and do we have a time frame over which we are anticipating that it will be concluded?

Mr Sweeting: The consultation process is to recognize that to move from a system of rebates filing after the fact of purchase exemption certificates needs to be done in a manner that can be accommodated by the retail sales tax collectors, the businesses that provide the service to the government, and it works for farmers and is communicated effectively. We anticipate the consultation period will be quite short on this and that there will be an opportunity to provide the prescribed date shortly.

Mr Young: There's another RST exemption-actually there are a few others-referenced in the budget. Deposit insurance for premiums in credit unions is yet another area that the government has targeted for a further tax cut. In a word, why? Why is the government exempting credit union deposit insurance premiums from RST?

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Mr Sweeting: I think credit unions play an important role in the Ontario economy. There's certainly an interest and a desire to see those expand and play a role in ensuring that we are effective and flexible and meeting different interests for credit unions. The deposit insurance is a barrier for a small business. A relatively small end of the financial services market is the credit union end of things. So it was felt that it would provide a support stimulus to that sector.

Phil, I don't know if you want to add to that.

Mr Howell: The credit unions already play an important role in smaller and local communities and have the potential to play an even greater role in the those areas in ensuring that access to capital is available to both individuals and businesses in those communities. Most of the credit unions are relatively small institutions. This supports the development and expansion of the credit union movement.

Mr Young: A couple of things arising out of that, and I want to be as clear as I can in the question-I hope you can be crystal clear in the answer as well-is this initiative going to in any way affect the level of deposit insurance available for investors, for customers of these credit unions? Is it in any way going to jeopardize the amount of money that is available should things go awry?

Dr Purchase: The answer is definitively no.

Mr Young: The second question I have arising out of your response is, do banks pay RST? Do they pay retail sales tax on their deposit insurance premiums? I guess I have the same question about trust companies.

Dr Purchase: The answer is yes, they do pay that. This is a differential move which benefits these particular financial institutions. For the purposes that both Mr Sweeting and Mr Howell have indicated, this budget follows on a number of beneficial moves to the sector in last year's budget where we removed the capital tax, for example, in the sector. Again, it is in response to the concerns of the small business community in particular, and increasing numbers of consumers who feel the banks are leaving these smaller communities, to have viable alternative financial institutions.

Mr Young: If I may, Mr Chair, I don't know how we're doing for time.

The Vice-Chair: Another minute.

Mr Young: One last area of retail sales tax I wanted to question you about deals with the rate reduction for repairs and replacements under warranties. We're obviously talking about automobile warranties, but I would ask you in your answer to also address whether or not this would be equally applicable to snowmobiles or other motor vehicles. My question to you is-let's start with that. Is it going to apply to motor vehicles other than just automobiles or is it limited to automobiles and trucks?

Mr Sweeting: The repair and warranty proposal is for any warranty. It could be a warranty on a toaster. The insurance provision is limited to motor vehicles, which would include trucks and that sort of thing that are, as is indicated, licensed under certain conditions. But the warranty proposal is available for wherever products are offered with a warranty for repairs and replacement.

Mr Young: You mentioned toasters, computers, televisions and so on and so forth. Can I ask one very quick follow-up, Mr Chair, or is my time gone?

The Vice-Chair: Your time is really up, just in fairness to the other parties. What has been suggested to me, and if there is no objection, I understand Dr Purchase would like to make a few summary comments, if that's in order, that probably would relate to some of the questions that have been asked that he feels haven't been covered. No objections? OK.

Dr Purchase: On behalf of the staff, I hope that we've been able to provide you with some of the information that you find useful. Certainly we take our responsibility very seriously to answer the questions as honestly and fairly as we can for all members of the committee.

In conclusion, I might just say in response to a number of issues that were raised about how do we get the revenues to finance future programs, that's something we're clearly concerned about, notwithstanding my remarks about the reliability of five-year forecasting. That comes from someone who has had many years' experience of forecasting.

Certainly I think it is the government's view that its tax initiatives will generate the kind of economic performance that will sustain and enhance revenues to support vital social programs. That's all I wished to say.

The Vice-Chair: Thank you very much for your comments and thank you for coming this morning along with your staff. It's certainly very much appreciated.

Just a reminder to committee members that amendments are to be tabled by tomorrow morning at 9 o'clock. The other area is that I see for this afternoon, 3:30 till I gather 6, it says "Discussion." I'm open to the kind of structure that discussion might take. You don't need to respond now but you might think through how you would like that handled when we reconvene at 3:30. The meeting is adjourned.

The committee recessed from 1156 to 1544.

The Vice-Chair: We will call the finance committee back to order. As we get started, what format would you like this to take? The agenda says "Discussion." Do you have some thoughts on how you would like to see it go?

Mr Phillips: Yes, Mr Chair. As you probably know from the discussion this morning and from the letter I sent-I assume all committee members got a copy of the letter-we had hoped our focus at this committee would be on the policy side of the issues. I'm very disappointed we can't have that discussion.

I gather we're not going to be able to do it on the bill. The committee is going to have to find some other forum to discuss the policy issues around: Where are we going on tax policy in the province? Have we now, as a matter of policy, embarked on a policy direction that corporate taxes are going to have to be very much contingent on our neighbouring states?

I can understand that, if that's going to be the policy direction. On the taxation of persons, on personal income tax-I put the capital gains tax and the $100,000 tax exemption on stock options in there-I think we're going to have to talk about how we raise our money in the province. We heard this morning of jurisdictions in the Scandinavian countries and the Netherlands where they've reduced corporate taxes, but they've chosen, I gather, to put their taxes elsewhere because their tax burden is still higher than in Canada. As I said, our hope had been that we might have the minister here and we could discuss the issues I outlined in that four-page letter. That's not possible.

The Liberal caucus has had two briefings on the details of the bill. We understand the bill. We understand it implements what the government said in the budget. There's little to be gained, from our caucus's point of view, in a prolonged discussion at this committee if we're not going to have a discussion on the policy side. I'm inclined to say that from our caucus's point of view, we should move swiftly through the bill. I gather there are one or two amendments that have to be made when we reach that section. They will have to be read into the record. There are maybe one or two amendments. Rather than getting angry with each other over the fact that we can't have a policy discussion, we should perhaps just move on.

The Vice-Chair: I think your point is well taken. Maybe Mr Young would like to make a response. I follow your argument and your concerns.

Mr Young: I'm quite pleased to respond, but perhaps we should hear from Mr Christopherson before I respond.

Mr Christopherson: It will save Mr Young having to respond twice, because I'm sure his answers are similar, given that my concerns are similar.

I agree with my colleague Mr Phillips, and it's in the Hansard. I've expressed this from the moment the parliamentary assistant led the Tory majority on this committee to overturn the subcommittee's reasoned approach on how to address the hearings here, and ultimately amendments. It puts us in the shameful position, in my opinion, of being expected to submit amendments by tomorrow, and we haven't even finished the second half of the hearings, as phony as they may be. Even the procedure is phony. There's not even an attempt to pretend it isn't. Usually they try to flower things up. In this case they haven't even done that. It's just so blatantly unfair and undemocratic and shows absolutely no interest on the part of the government to listen to anyone.

I agree with Mr Phillips. In fact, I really didn't think there was much use and point in having what we did today and scheduling the second day, given that we weren't going to have anyone here except the staff. It makes no sense. I mentioned earlier that I had comments and debate I wanted to engage in with the presenters, but they're staff people. It's not fair to do that. Their job is to come in and represent their minister. I want to talk to the minister. I want to talk about the issues. I want to talk about the politics of the decisions that are being made, the philosophical choices that were made and the philosophical choices that were rejected.

I can engage in none of those things, in fairness, with the staff, so I agree with Mr Phillips that we ought to just bring this charade to an end and move on to the amendments, which is a further charade. There's no point. We don't even have time to put in intelligent amendments. It's self-explanatory why we can't do that. So I agree. Let's just get on with this farce and get it over with because nothing we say or do is going to make one whit of difference at the end of the day, not one.

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Mr Young: I'm torn between spending a significant amount of time responding to the basis on which my friends across the way have arrived at their conclusion, or simply accepting that there is no desire to spend a good deal of time at this committee by the opposition parties. What I'll do by way of compromise is very briefly repeat what I said when this committee met about two weeks ago to formulate the procedure we were going to follow.

I should add, with the greatest respect to Mr Phillips and Mr Christopherson, that's essentially what they have just done now and what they did to one degree or another this morning.

I want to point out that prior to getting to the point we're at now, this committee spent a very significant amount of time listening to submissions from economists, individuals and organizations not only in the capital city of Toronto but across the province, in areas of the province, I might add, that are represented by members from all of the parties that have the privilege of serving in this Legislature.

There was a rather significant opportunity for members to question Minister Eves when he attended at this committee at a very formative time when the policies were being formulated, in my respectful submission at a most important time. In addition, the ministry and the minister, as well as the parliamentary assistant, spent a good deal of time meeting with representatives from various organizations, various individuals and accepted submissions from hundreds of individuals and organizations. That's in addition to the 10 days of hearings that I understand took place.

It is true that the members opposite did not succeed in crafting or putting together this committee at this juncture in the way they wanted to, but for the record to be clear it has to be remembered that this has been a rather lengthy, very open and very important process that has been comprehensive in its scope. It is true that we are at the end of the process in many respects.

There is an opportunity for amendments to be submitted if it is the will of everyone here-or at least the majority-that what we do at this juncture is put whatever amendments we have on the table today and we're content that that will be the end of it and we go through and we vote on it. I'm quite content to do that. If what is being suggested is that we adjourn this afternoon and follow the procedure thereafter in terms of the submission of amendments and the ultimate voting next week, I'm content to do that.

I'm a little unclear as to what is being suggested. I appreciate what is being suggested will expedite the process and I support them in that regard, although I come at it from a different perspective as I've tried to explain in the last few moments.

The Vice-Chair: Trying for a bit of a compromise here, as the Chair, I hear what's being said and this general philosophy of, where does the tax come from to cover whatever? At this point in time, it's not realistic that we're going to get that kind of discussion going this month. I'm wondering if in the fall, prior to listening to delegations, that might be a time to look in a kind of thorough sense, over I'm not sure how many days of discussion, to look philosophically before we listen to delegations going into the next budget exercise. Is that something that might be realistic, might be practical?

Mr Young: I apologize, Mr Chair, my attention was averted during some of your comments.

The Vice-Chair: I was referring to the philosophical direction of: Where do you cut tax? Where do you maintain tax to obtain-is that something that could be done in the early fall?

Mr Young: Sure. We're open to having those sort of discussions, and if there is a desire to do that, we're prepared to consider any request in that regard. I say this with the greatest respect: My view is that that has taken place. Frankly, that took place last June. There was an election that dealt with different philosophies and the discussion continues in the Legislature each and every day during question period. It continued in this committee during the 10 days of hearings. But I'm open to suggestions. If there is a desire from others for that sort of process, sure, we can consider that.

Mr Phillips: I think that may be worthwhile in the fall. We are now the most export-oriented jurisdiction in the industrial world. I think that has profound implications. I say to Mr Young I'm happy to spend whatever time is necessary at this committee if there is a way to debate the questions I raised. I have been through the Blueprint many times. You never promised a 40% cut in corporate taxes, or a one-third cut in capital gains tax then. You never even mentioned that. That was never, ever breathed. Frankly, during our committee hearings, the subject of a 40% cut in corporate taxes and a one-third cut in capital gains-I don't even remember any of the presenters ever having that.

The pre-budget hearings are important, but what's more important now is, here's what the government has decided to do with it and now we can't really have reasonable debate about it. I laid our caucus's in four pages, things we think are worth discussing. It's clear we're not going to get a chance to do it here. But this obviously won't be the end of it, and I think it's worth the committee's revisiting it. This is what the government says in this document: "We now are the most export-oriented jurisdiction in the industrial world. Exports are now equivalent to 55% of our gross domestic product. Ten years ago, it was 29%." That's just what the government said. You can see now it's beginning to, in my opinion, have a real, profound impact on tax policy. For the first time I can recall, by the way, there was no comparison of other provinces in the budget; it was versus neighbouring states. That's just the reality today.

The Liberal caucus is prepared to spend whatever time is necessary if we can debate what we think are the fundamental issues here-if we can.

Mr Kwinter: I just want to respond to Mr Young and tell you the concern I have. He gives the impression that this document, this act, is a direct result of our pre-budget hearings, as if this were the report of the committee of economic affairs, and for finance, to the Legislature as a result of those hearings. We made our report. There were two minority reports that went through. This is the government's act. For us to sit and try to change the policies-we can go through clause-by-clause, as we're going to do, and if we think there's some wording that isn't right or if we're going to present our amendments-the point is that when you look at the first page of our briefing binder, virtually every item on there, with the exception of a couple, was never even discussed at the pre-budget hearings in any kind of detail.

We're saying it's kind of futile for us to be sitting here and to accept this as a fait accompli and expect that we should be talking to it as if we're going to have any impact on it. We're not. We didn't have, this morning, a political presence so that we could discuss policy. I think we put Bryne Purchase in a terrible position. The poor guy was sitting here and was taking a lot of political flack when that's not his role. All he was doing was saying was: "Here, this is the bill as it's been drafted. If you want to ask us specific things about the structure of the bill or about some of the assumptions that were made, ask me."

But if you want to question policy, as my colleague has said, if you want to question this whole business which I feel very strongly about, where he equates imports as comparable to exports other than by number, saying that the difference is that there's only about a 16% dependence, for anybody, particularly someone who's the Deputy Minister of Finance, to suggest that X dollars of products that are developed in Ontario, with all of the spinoffs and all of the jobs and all of the economic benefits, equates to imports that come in with no value added and say it's a wash, other than whatever the numbers differ, makes no economic sense.

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Without being able to debate it to find out what the assumptions are for what is going to happen, it was kind of refreshing to hear-and I apologize; I don't remember what his new riding is-Mr Kells talking about what was happening with the Fung report and hear something that's 20 years off into the future with development. The Deputy Treasurer is saying, "We don't even project five years," so how can you endorse something that's got a 20-year extension without having a clue as to whether or not you're ever going to be able to make your commitments?

That's our frustration. We're not saying we want to be obstructionist; this particular bill is being presented to us and we're saying: "Fine, we will do what we have to do politically to talk about it, do what we want. We will fulfill our responsibilities when it comes to clause-by-clause, and if we can make some suggestions-and we're certainly putting forward some amendments." But to do anything other than that is just an exercise in talking to each other. Many of us have more important things we could be doing. It's a simple as that.

The Vice-Chair: Any other comments?

Mr Young: Only a procedural point. It is my understanding that if we are going to vote now, which I have no objection to doing, I understand the clerk has to arrange for counsel to be here-is that correct?-and that there will be a delay of 20 or 30 minutes attached to that. It would be my suggestion, and it's only a suggestion, that perhaps a better answer would be to come back on June 8 for a brief period. But if it's the will of the committee to adjourn for 30 minutes or so and have counsel come in and then table the amendments, I'm content to do that as well.

The Vice-Chair: I would suggest we adjourn and do it at 10 o'clock next Thursday morning.

Mr Young: As I say, my inclination is to do just that.

The Vice-Chair: It is listed for 9, but with your indulgence I would appreciate if it was 10, because I don't think it'll take that long.

Mr Christopherson: I'm in House leaders until at least 10, maybe later, so-

Mr Young: We can do it later-

Mr Christopherson: -I would prefer 10.

Mr Young: We could do it at 10:30. It's not going to take long.

Mr Christopherson: Yes, 10:30 gives me a much better chance of being here.

The Vice-Chair: If there's no further debate and discussion, then-sorry. Mr Arnott.

Mr Arnott: I'm fine with that. I just wanted to respond to an important point that Mr Christopherson made this morning about the World Trade Organization ruling on the auto pact. If I could just briefly do that, Mr Chairman, I think it would be appropriate.

The Vice-Chair: Certainly.

Mr Arnott: It's my understanding that yesterday at 9 o'clock the appellate body of the WTO released their ruling on Canada's appeal of the WTO dispute panel report on Canada's auto pact. The details of the appellate body ruling were not available until late last night, and unfortunately I have not seen the final result of that report. But I do want to put on the record the government's preliminary response to this issue.

The government is well aware that almost 90% of Canada's auto industry resides in Ontario. Over 140,000 people are directly employed in automotive manufacturing, and almost that many again in the automotive after-market industry. The government obviously takes this issue very, very seriously.

As well, we know that this matter is a federal jurisdiction. We urge the federal government to implement the ruling in a fair manner which ensures the long-term health of the automotive industry.

This week, the Minister of Economic Development and Trade, the Honourable Al Palladini, is in Japan attracting further investment. It's my understanding that he will be attempting to speak with his federal counterpart when he returns to the country.

Mr Christopherson: If I might, briefly.

The Vice-Chair: Mr Christopherson.

Mr Christopherson: Thank you. I appreciate Mr Arnott's attempt to bring us up to speed. But I would also say for the record that you say the government takes it very seriously, and yet we had a deputy minister in here this morning who could not speak word one officially about anything your government had to say. It would seem to me you haven't taken it very seriously at all. You should have been quite ready for one of a number of eventualities in terms of a ruling. I think the lack of action speaks much louder than the short statement you've read here today.

The Vice-Chair: I think that pretty well wound up any discussion this afternoon. So, hearing no objections, the committee will reconvene at 10:30 on June 8 to address clause-by-clause. Amendments are to be in tomorrow morning, June 2, by 9 o'clock to the clerk's office.

Any further discussion or any comments for the committee? If not, I declare the committee adjourned.